Boeing found to have overcharged Army for helicopter parts

By Charles S. Clark

June 28, 2011

The Army was charged $23 million for spare helicopter parts worth only $10 million, according to a Defense Department inspector general's report made public Tuesday by the Project on Government Oversight.

Aerospace and defense contractor Boeing billed the Army $1,678.61 for a plastic roller assembly that was available for $7.71 internally from Pentagon supplies, according to the report.The company also charged the Army $71.01 per unit for a set of metal pins that Defense could have provided for 4 cents, a POGO analysis said, a markup of more than 177,000 percent.

"We're not sure which is more outrageous -- Boeing's audacity in ripping off taxpayers, or the Army blindly accepting Boeing's jacked-up prices," said POGO Executive Director Danielle Brian. "This report raises serious questions about whether this is symptomatic of a much larger problem with oversight of contracts."

The 142-page report, dated May 3, is marked "For Official Use Only." A shorter summary had appeared on the Defense inspector general's website, reported first by Bloomberg News.

The report criticizes the Army for not bargaining harder on prices. The IG recommended that Boeing refund the Army $6 million, but the Army rejected that proposal.

Robert Algarotti, rotorcraft support communications manager for Boeing in St. Louis, told Government Executive: "We have a long history of supporting our Army customer, and we are committed to working closely with our customer to ensure we are maximizing efficiencies. We are cooperating fully with every aspect of the DoD IG's audit."

Algarotti pointed to rapidly changing requirements during a time of war. "In a period of about three years during wartime at the Corpus Christi Army Depot, we contracted for nearly 8,000 individual parts," he said. "The handful of errors cited by the IG's initial report represents an extremely small part of our outstanding support to our U.S. Army customer. Boeing voluntarily reimbursed the government for the items cited and already improved our process, which will prevent reoccurrence of these errors."

He added that the Corpus Christi logistics contract is performance-based. "During the time when the performance metric was repair turnaround time," he said, "we improved this measurement by 43 percent."

Dan O'Boyle, a public affairs officer at the Aviation and Missile Command at Redstone Arsenal, Ala., said in a statement to Government Executive that the command "has responded with full cooperation to the concerns expressed in the DoD IG report and agrees with aspects of the report, such as the criticality of having full visibility of Defense Logistic Support Inventory, the need to have controls and procedures in place to properly manage and avoid excess inventory and to have proper controls in place to take advantage of quantity discounts for the government to the maximum extent possible."